LIMCOMA Labor Organization (LLO)-PLAC vs. LIMCOMA Multi-Purpose Coop.

A profit-sharing provision in a CBA granting benefits to "all regular employees" must be read in light of the CBA's scope-and-coverage clause, which limits the term "employee" to rank-and-file members of the bargaining unit; managerial, supervisory, and confidential employees are excluded from sharing in that CBA-derived pool, though the employer may separately grant them equivalent benefits under its management prerogative.

Petitioner Limcoma Labor Organization (LLO)-PLAC is a duly registered labor union and the Sole and Exclusive Bargaining Agent (SEBA) representing the regular rank-and-file employees of respondent Limcoma Multi-Purpose Cooperative. Excluded from the bargaining unit were supervisors, technical and confidential employees, and managerial employees, including the Board of Directors. In July 2005, respondent implemented a Voluntary Retire-Rehire (VRR) Program, which was initially opposed by petitioner but settled through a Memorandum of Agreement dated July 29, 2005. The MOA provided, among other benefits, that covered employees would retire and be rehired as new regular employees, that profit sharing would increase from 15% to 18%, and that a new CBA would be negotiated in October 2005. The first CBA was implemented on April 1, 2006, and renewed on July 4, 2011 for a five-year term, with both versions containing the same profit-sharing language in Section 2, Article VIII.

Petitioner Limcoma Labor Organization (LLO)-PLAC is a duly registered labor union affiliated with the Philippine Labor Alliance Council (PLAC) and serves as the Sole and Exclusive Bargaining Agent (SEBA) for the regular rank-and-file employees of respondent Limcoma Multi-Purpose Cooperative. Supervisors, technical and confidential employees, and managerial employees, including the Board of Directors, were excluded from the bargaining unit. In July 2005, respondent implemented a Voluntary Retire-Rehire (VRR) Program, which petitioner initially opposed. After negotiation, the parties settled the issues in a Memorandum of Agreement dated July 29, 2005, which provided, among other things, that covered employees would retire and receive severance pay, be rehired immediately as new regular employees, enjoy the 15% profit sharing increased to 18%, and that petitioner would continue as SEBA while a new CBA would be negotiated in October 2005.

The first CBA was implemented on April 1, 2006, following the VRR Program, and was renewed on July 4, 2011 for a five-year term effective April 1, 2011 to March 31, 2016, subject to reopening and renegotiation of wages and other economic benefits. Both CBAs contained the same profit-sharing provision under Section 2, Article VIII, which stated: "The COOPERATIVE agrees to grant to all regular employees a profit-sharing equivalent to Eighteen Percent (18%) of the net surplus less x x x distribution of which shall be based on the basic salary." The CBA's scope-and-coverage clause in Section 2 of Article II specified that "all covered rank and file employees/workers of the COOPERATIVE shall compose of the collective bargaining unit" and that the word "EMPLOYEE" in the agreement "shall be understood unless otherwise indicated as referring to an employee within the collective bargaining unit."

It was only during the Wage Reopening negotiation in 2014 that petitioner discovered respondent had entered into a "Kasunduan sa Voluntary Retire-Rehire Program" (K-VRR) with its supervisors, technical and confidential employees, and managers. Under the K-VRR, the non-rank-and-file signatories were also to receive a grant of 18% profit sharing. Petitioner alleged that respondent had not explained how the individual profit sharing of rank-and-file employees was determined. The Wage Reopening negotiation ended in a deadlock, resulting in arbitration before DOLE Accredited Voluntary Arbitrator Atty. Cenon Wesley P. Gacutan, who was appointed by both parties. The VA declared that the 18% profit-sharing provision in the CBA was due only to covered rank-and-file employees, excluding supervisory, confidential, and managerial employees. Respondent's motion for reconsideration was denied by the VA on February 26, 2015.

Respondent elevated the matter to the Court of Appeals via a petition for review on certiorari under Rule 65. On August 9, 2017, the CA reversed the VA's ruling, holding that all regular employees regardless of rank were entitled to the 18% profit sharing and that expenses for hospitalization, rice subsidy, and excess 13th month pay were deductible from the 18% net surplus. Petitioner's motion for reconsideration was denied on May 16, 2018. The present petition covers the claim of share in the net surplus for the years 2011, 2012, and 2013, the deadlock issue having become academic due to the expiration of the 2011–2016 CBA and its renewal for 2016–2021.

• Scope of CBA Profit Sharing: Petitioner argued that the 18% of the net surplus under the negotiated CBA should be distributed only among covered regular rank-and-file employees, and that a separate allocation — whether 18% or otherwise — should be made for non-covered employees under the employer's management prerogative, rather than drawing from the same CBA-mandated pool.
• Prohibition on Managerial Employees in Rank-and-File Bargaining Units: Petitioner contended that the CA's interpretation, by applying the CBA provision to all regular employees regardless of rank, indirectly violated Article 245 of the Labor Code, which bars managerial employees from joining the collective bargaining unit of rank-and-file employees.
• Irrelevance of Voluntary Grant Ripening into Practice: Petitioner asserted that the CA erroneously assumed the profit-sharing scheme was premised on a speculative voluntary grant ripening into a practice of giving bonuses, when the issue actually brought for resolution was the interpretation of Section 2, Article VIII of the CBA, not whether the benefits were voluntary grants that had ripened into practice.

• Clarity of CBA Provision: Respondent countered that the subject provision was clear and specifically stated that all employees were granted the profit-sharing benefit, asserting that if the parties intended it to mean otherwise, it should have been rephrased or changed when the CBA was renegotiated.
• Long-Standing Practice: Respondent argued that it had been a long-standing practice of the cooperative to grant an annual profit-sharing bonus to all regular employees from a fixed portion of its net surplus.

• Coverage of CBA Profit-Sharing Provision: Whether the CA committed serious error in ruling that supervisors, confidential, and managerial employees are entitled to benefit from the provisions of the CBA of rank-and-file employees.
• Nature of the 18% Net Surplus Grant: Whether the CA misapprehended the fact that the 18% of net surplus under the parties' CBA is a unilateral grant under management prerogative and is the same 18% respondent obligated itself under the K-VRR entered with non-covered or excluded employees in the bargaining unit.

• Coverage of CBA Profit-Sharing Provision: Yes. The CA erred in ruling that supervisors, confidential, and managerial employees are entitled to benefit from the CBA's profit-sharing provision. The CBA's scope-and-coverage clause expressly limited the term "employee" to rank-and-file members of the bargaining unit, and the literal meaning of the stipulations controls under Article 1370 of the Civil Code.
• Nature of the 18% Net Surplus Grant: Yes. The CA misapprehended the nature of the 18% grant. The profit sharing under the CBA is a negotiated benefit due exclusively to rank-and-file employees, while the grant to non-rank-and-file employees under the K-VRR is a separate exercise of management prerogative that must not be drawn from the same CBA-mandated pool.

• Coverage of CBA Profit-Sharing Provision: The Court applied Article 1370 of the Civil Code, which provides that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. The CBA's scope-and-coverage clause in Section 2 of Article II expressly defined "employee" as referring to an employee within the collective bargaining unit, composed of rank-and-file employees. Applying Article 1374 of the Civil Code, which requires that the various stipulations of a contract be interpreted together, the phrase "all regular employee" in the profit-sharing provision could only mean all regular rank-and-file employees. To interpret it otherwise would indirectly violate Article 245 of the Labor Code, which bars managerial employees from joining the collective bargaining unit of rank-and-file employees, as managerial employees cannot be allowed to share in concessions obtained by the labor union through collective negotiation. Moreover, including non-rank-and-file employees would violate the profit-sharing provision itself, because rank-and-file employees would no longer receive an "equivalent to 18% of the net surplus" if they had to share it with employees not covered by the CBA.

• Nature of the 18% Net Surplus Grant: The Court recognized that the grant of a bonus is fundamentally a management prerogative, and nothing prevents an employer from granting benefits to managerial employees equal to or higher than those afforded to union members. Respondent had in fact exercised this prerogative when it entered into the K-VRR Program with its supervisors, technical and confidential employees, and managers. The benefits granted under the K-VRR, however, are not by virtue of the CBA but in accordance with a separate agreement. The Court further addressed respondent's claim that the profit-sharing bonus had ripened into practice, citing the Non-Diminution Rule under Article 100 of the Labor Code as discussed in Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor Union-NLU. The Court held that the rule against diminution of benefits will not apply if the practice is due to error in the construction or application of a doubtful or difficult question of law, provided the correction is done soon after discovery of the error. In this case, there was an error in the construction of the CBA, and petitioner discovered the arrangement only during renegotiation and immediately raised a grievance. Respondent could not raise estoppel or ripened practice as a defense. Accordingly, respondent was ordered to comply with the CBA by providing profit sharing to all regular rank-and-file employees equivalent to 18% of the net surplus, and to provide separately for the profit share of employees under the K-VRR Program, which shall not be taken from the CBA-mandated pool.

• Literal Interpretation of CBA Stipulations — Under Article 1370 of the Civil Code, if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. A CBA, being the law between the parties, must be interpreted according to its literal meaning when clear. In this case, the scope-and-coverage clause expressly limited "employee" to rank-and-file members of the bargaining unit, and the profit-sharing provision was read in light of that definition.

• Holistic Interpretation of Contracts — Under Article 1374 of the Civil Code, the various stipulations of a contract must be interpreted together, attributing to doubtful ones that sense which may result from all of them taken jointly. The Court applied this principle by reading the profit-sharing provision in conjunction with the scope-and-coverage clause, concluding that "all regular employees" meant only rank-and-file employees within the bargaining unit.

• Prohibition on Managerial Employees Joining Rank-and-File Bargaining Units — Under Article 245 of the Labor Code, managerial employees are barred from joining the collective bargaining unit of rank-and-file employees. Managerial employees cannot be allowed to share in concessions obtained by the labor union through collective negotiation, as they would be exposed to the temptation of colluding with the union during negotiations to the detriment of the employer. The Court held that interpreting the CBA to include managerial employees in the profit-sharing pool would indirectly violate this prohibition.

• Management Prerogative to Grant Benefits to Non-Union Employees — The grant of a bonus is basically a management prerogative, and nothing prevents an employer from granting benefits to managerial employees equal to or higher than those afforded to union members. There can be no conflict of interest where the employer itself voluntarily agrees to grant such benefits. However, such benefits are not by virtue of the CBA but arise from a separate agreement or practice.

• Non-Diminution Rule — Exception for Error in Construction — Under Article 100 of the Labor Code, benefits given to employees cannot be taken back or reduced unilaterally once they have become part of the employment contract through express policy or consistent practice. Nevertheless, the rule will not apply if the practice is due to error in the construction or application of a doubtful or difficult question of law, provided the correction is done soon after discovery of the error. In this case, the erroneous construction of the CBA was corrected upon discovery during renegotiation.

• "Applying the above to the questioned provision, there is no other meaning or interpretation of the phrase 'all regular employee' as mentioned under the CBA but all regular rank-and-file employee only of respondent. Corollarily, this means that supervisory, confidential and managerial employees or those who will fall as non-rank-and-file employee are excluded." — This passage articulates the ratio decidendi on the proper interpretation of the CBA's profit-sharing provision in light of its scope-and-coverage clause.

• "To interpret it otherwise would indirectly violate the rule provided under Article 245 of the Labor Code that bars managerial employees from joining the collective bargaining unit of rank-and-file employees. Managerial employees cannot be allowed to share in the concessions obtained by the labor union through collective negotiation." — This passage explains why including managerial employees in the CBA-derived profit pool would contravene the Labor Code's separation of bargaining units.

• "Respondent can enter into an agreement with the other employees, managerial and supervisory employees, and give the same benefit as that which was given in the CBA. This is in fact what they did when they entered into the K-VRR Program x x x. But, to clarify, the benefits given is not by virtue of the CBA but in accordance with a separate agreement or those which have ripened into practice." — This passage delineates the boundary between CBA-negotiated benefits and management-prerogative grants to non-union employees.

• "In the case at bar, there was an error in the construction of the CBA. Thus, it is proper that the same be corrected. Respondent cannot raise as a defense that the profit share bonus has ripened into practice." — This passage applies the exception to the Non-Diminution Rule for errors in construction of a doubtful question of law.

• Jaca vs. Davao Lumber Company, 198 Phil. 493 (1982) — Cited for the proposition that certiorari may be resorted to despite the availability of appeal when the appeal is not an adequate remedy, supporting the Court's decision to treat respondent's Rule 65 petition as a proper recourse in the interest of justice.
• Mora vs. Avesco Marketing Corporation, 591 Phil. 827 (2008) — Followed for the principle that labor rules may be relaxed in the interest of substantial justice, as the Court therein decided a case on the merits despite the petitioner's erroneous filing of a petition for certiorari against a VA's decision.
• Wesleyan University-Philippines vs. Wesleyan University-Faculty and Staff Association, 729 Phil. 240 (2014) — Cited for the doctrine that a CBA is a contract negotiated between employer and legitimate labor organization, has the force of law between the parties, and should be complied with in good faith.
• Philippine Journalist, Inc. vs. Journal Employees Union, 710 Phil. 94 (2013) — Followed for the rule that the literal meaning of CBA stipulations controls when they are clear and leave no doubt upon the intention of the contracting parties, pursuant to Article 1370 of the Civil Code.
• Manila Hotel Corp. vs. De Leon, 836 Phil. 594 (2018) — Cited for the principle that managerial employees are barred from joining rank-and-file bargaining units and cannot share in concessions obtained through collective negotiation.
• Martinez vs. NLRC, 358 Phil. 288 (1998) — Cited for the proposition that there is no conflict of interest where the employer itself voluntarily agrees to grant benefits to managerial employees equal to or higher than those afforded to union members.
• Central Azucarera de Tarlac vs. Central Azucarera de Tarlac Labor Union-NLU, 639 Phil. 633 (2010) — Followed for the exception to the Non-Diminution Rule under Article 100 of the Labor Code, holding that the rule against diminution of benefits will not apply if the practice is due to error in the construction or application of a doubtful or difficult question of law, provided correction is done soon after discovery.

• Article 1370, Civil Code — Provides that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. Applied to hold that the CBA's profit-sharing provision must be read according to its literal meaning, as informed by the scope-and-coverage clause.
• Article 1374, Civil Code — Provides that the various stipulations of a contract shall be interpreted together, attributing to doubtful ones that sense which may result from all of them taken jointly. Applied to read the profit-sharing provision in conjunction with the scope-and-coverage clause to determine the covered employees.
• Article 245, Labor Code — Bars managerial employees from joining the collective bargaining unit of rank-and-file employees. Applied to hold that interpreting the CBA to include managerial employees in the profit-sharing pool would indirectly violate this prohibition.
• Article 100, Labor Code (Non-Diminution Rule) — Mandates that benefits given to employees cannot be taken back or reduced unilaterally by the employer once they have become part of the employment contract. Applied through its exception: the rule does not apply where the practice is due to error in construction or application of a doubtful question of law, provided correction is done soon after discovery.
• Article 261, Labor Code — Defines the jurisdiction of voluntary arbitrators over unresolved grievances arising from the interpretation or implementation of the CBA. Cited to establish the VA's original and exclusive jurisdiction over the dispute.
• Article 262, Labor Code — Provides that voluntary arbitrators, upon agreement of the parties, may hear and decide all other labor disputes including unfair labor practices and bargaining deadlocks. Cited in relation to the VA's jurisdiction.
• Sections 1 and 3, Rule 43, Rules of Court — Govern appeals from awards, judgments, final orders, or resolutions of quasi-judicial agencies including voluntary arbitrators. Cited to note that the proper remedy against a VA's decision is appeal under Rule 43, though the Court relaxed this rule in the interest of justice.
• Rule 65, Rules of Court — Governs petitions for certiorari. Respondent used this remedy before the CA; the Court noted it was not the proper remedy but permitted relaxation of procedural rules in the interest of substantial justice.

Perlas-Bernabe, S.A.J. (Chairperson), Inting, J., and Dimaampao, J., concurred. Hernando, J., was on official leave.